CBIA, Businesses Speak Out on Taxes at Hearing

Business owners say the Democratic-written tax package would hurt the state economy.

From veterinarians to home builders to accountants, business owners came forward Monday to say the Democratic-written tax package should be rejected because it would hurt the state economy.

An estimated 20,000 businesses, as calculated by the state tax department, would be impacted by the proposal to charge sales tax for the first time on various services and increase the sales tax on computer and data processing services.

Joseph Brennan, the chief executive officer of the 10,000-member Connecticut Business and Industry Association, said that the tax package, if approved by the full legislature, "really would do serious and long-term harm to our economy.''

"I think it's a defining moment for the state of Connecticut,'' Brennan said at the Capitol complex at a key hearing on the multi-faceted tax proposal.

Some large corporations could find tax increases "in the tens of millions of dollars'' if the package is approved.

"I really think every business is going to be impacted in some way, shape or form,'' he said.

When Gov. Dannel P. Malloy and the legislature approved the largest tax increase in state history in 2011, Brennan said he believed that all of the extra revenue would lead to large budget surpluses. But that has not been the case as economic growth in Connecticut has remained slow.

"I thought we would be swimming in dollars by now,'' Brennan told lawmakers. "I wish we were swimming in money. ... I wish that was the case. ... I read The Globe every day, and there are articles in there that ask: Is Boston growing too fast?''

Since no public hearing was held on the precise details of the Democratic tax proposals that were not unveiled until the day the tax committee voted, the Republicans on the tax-writing finance committee hosted an informational forum Monday with numerous speakers.

Now that Gov. Dannel P. Malloy's campaign pledge not to raise taxes is in the political rearview mirror, the Democratic governor's political base is seeking to widen the tax debate in hopes of averting some painful spending cuts.

Higher income tax rates on the wealthy, restoration of the capital...

More than 100 people signed up to testify Monday at a hearing that attracted hundreds to the Capitol complex that spilled out of the main hearing room and into two overflow rooms.

Longtime business leader Oz Griebel, the president and CEO of the MetroHartford Alliance, said that 49 other states are competing for the jobs that Connecticut wants.

"The proposals ... have already sent a very negative message, regardless of what the final budget is, to the private sector,'' Griebel said, adding that it is "a horrific negative signal.''

"The private sector is the goose that lays of golden eggs of tax revenues,'' Griebel said, adding that businesses often look forward to the next five to seven years when they are making decisions about the future.

Sen. L. Scott Frantz, a Greenwich Republican who co-chaired the hearing, announced that 5,400 people had signed the Republicans' no-tax pledge. Two overflow rooms in the Legislative Office Building were opened in Rooms 1A and 1C because the crowd was so large.

Under the proposal, the state sales tax rate would drop, but a new municipal rate of 0.5 percent would be added into the total. As a result, the sales tax that consumers pay will not drop until July 2016. It will remain at 6.35 percent until dropping to 5.85 percent more than one year from now.

During one exchange, the lawmakers discussed the pressure from social service providers who are seeking to restore budget cuts. Daniela Giordano, the public policy director of the National Alliance of Mental Illness, said that citizens could end up in prison or homeless shelters if they cannot receive the services they need.

“No want wants to see new taxes, but we want to have fair taxes,’’ Giordano said. “The finance committee put together a package that promotes balance and fairness in our system.’’

Giordano told Republicans that their alternative plan was “somewhat unrealistic’’ for relying on labor savings when the state employees unions have not yet agreed to such savings.

But Rep. Christopher Davis, the ranking House Republican on the tax committee, said the state still needs to receive $253 million in savings from a labor package that have not yet been achieved.

Jim Brown, the general manager who has worked for the past 18 years for a corporate moving company known as William B. Meyer, Inc. of Fairfield, listed a long series of corporations that the company has moved out of state through the years. Those include GTE, UPS, International Paper, Olympus; Exxon Mobil from Stratford; Stolt-Nielsen from Norwalk to Texas; and Cadbury Beverage.

"Who's next?'' Brown asked. "Major corporations that we have moved into the state in the last 15 years? Zero. ... They're consolidating operations, but they don't consolidate them in Connecticut.''

When asked by a lawmaker about testimony that companies move out of Connecticut because of the cold weather, Brown responded, "It's been cold in Connecticut in the winter for thousands of years. I guess I should say officially for 250 years.''

Dr. Arnold Goldman of Canton, representing the Connecticut Veterinary Medical Association, opposed the plan for a new sales tax for the first time on veterninary services. It is the only healthcare field included in the tax plan.

Those will autism "relate better to animals than they do to people,'' said Dr. Stewart "Chip'' Beckett III, a veterinarian who also serves as chairman of the Glastonbury town council.

Nowadays, animals get CAT Scans in the same way as humans, they said. Those services would now be taxed.

Bill Either, chief executive officer of the Home Builders and Remodelers Association of Connecticut, said that the number of building permits in Connecticut have not rebounded as they have nationwide. The new taxes on various services to construct a home would add about $600 in taxes per home, officials said.

While business owners opposed the tax increases, union members and others applauded the recommendations by the appropriations and finance committees.

Tom Swan, the longtime executive director of the Connecticut Citizen Action Group, said Monday's hearing was "mostly about posturing'' by the Republicans because it was not an official public hearing that can be held only by the Democratic majority. Swan derided the "regurgitated talking points'' by businesses against taxes. While saying that the Democratic-written tax package is not perfect, Swan said that it was "far superior to any other options currently on the table.''

Regarding the proposed tax hikes, Swan said, "I'm sure some of Senator Frantz's neighbors wouldn't even notice it in terms of their petty-cash accounts.''

Lobbyist Eric George of the Insurance Association of Connecticut said the tax bill is sending Connecticut in the wrong direction.

"When small and medium-sized businesses are at risk, everybody is at risk,'' George said. "We strongly oppose the tax increases'' in Senate Bill 946.

Stephen Hunt, an independent insurance agent from Avon, said the state and federal governments should not have spent more than $500 million on the New Britain-to-Hartford busway and instead improve some of the traffic chokepoints around the state.

Lisa Davenport, an interior designer and business owner in Durham, said the proposed new sales taxes of 6.35 percent on residential interior design, as well as architectural, drafting, and engineering services, would hurt small businesses.

"I want to have a vital business here in Connecticut,'' Davenport said. "Connecticut no longer appears to be business friendly.''